Wilmar

Wilmar: UOB Kay Hian maintains Buy with $3.80 TP. House expects sugar crushing ahead of schedule to provide earnings boost for 3Q and mitigating the margin pressure from soybean crushing and plantations. The key takeaway from recent meeting with management is that sugar will be the growth focus for Wilmar with its recent acquisition in Africa and expanding into new emerging markets in Indochina. The growth in the sugar division will cushion the volatility from the soybean crushing division, which is seeing declining contribution to group pre-tax profit (PBT) (2011: 20.3% of PBT, 2013F: 11.7%) House had earlier highlighted that Indonesian refining margins have shrunk significantly due to rising competition from new capacities, leading to higher feedstock prices and lower refining product prices. Wilmar’s downstream operations are one of the most complete, making it cost efficient while its ability to customise products to meet customers’ requirements build up strong customer relationship and hence, command better margins. Thus, for 1H13, Wilmar continued to surprise the market with its refining pre-tax margin of >US$30/tonne. For 2013, expecting a pre-tax margin of US$33/tonne (2012: US$33.4/tonne).